Spain and Portugal Reenter European Fold

IN several towns that Paula Mota Alvez crosses every day, the
young entrepreneur observes a telltale sign of change in the way
Portugal does business.

"What you see are the cafes occupying the best locations in town
closing up and being renovated into banks," she says. "And they
aren't just Portuguese banks, but from Spain and elsewhere in the
{European} Community," adds Ms. Mota, a mechanical engineer by
training. "That tells me something."

The native of Portugal's northern Porto region is herself an
example of how Portugal, and indeed the whole of the Iberian
Peninsula, is evolving in its quest to economically and socially
integrate and "catch up" with the prosperous EC.

A few years ago, if a young Portuguese woman chose a career in
engineering at all, she would very likely have worked in the
country's dominant nationalized industrial sector. Or, before the
wave of nationalizations in the mid-'70s, she might have worked for
a company owned by one of the hundred or so families that held
Portugal's economic strings in their hands.

But Mota had a different dream. Today she employs 12 people in
the cut-flower and ornamental plant business she runs from 35 acres
of land just south of Porto.

As a young business owner, she is taking part in Portugal's
shift to a modern European economy where small and medium-size
companies have more weight. These firms now account for half of the
country's exports. Meanwhile, traditional industries such as
textiles and shoes must either make great strides in quality and
productivity or close as markets are increasingly opened to
participation and competition from the EC and elsewhere abroad.

A similar transition is taking place in neighboring Spain,
although a different history and a larger, less centralized economy
make its experience different. Historically a collection of
kingdoms that evolved into today's assertive regions, Spain never
experienced the concentration of its productive power in a few
private hands to the extent Portugal did.

Moreover, Spain was more thoroughly removed from the outside
world economy than Portugal. Spain lost most of its colonial empire
centuries ago. Then it was subjected to nearly a half-century of
General Francisco Franco's highly protectionist nationalism until
1975.

For centuries, and even well before Christopher Colombus set his
foot down in the sands of America in 1492, Portugal has been an
outward-looking country - though with its back to the continent on
which it sits. As recently as the 1960s, much of Portugal's
economic activity related to colonies in Africa.

"Business people didn't bother to look outside the world of
Portugal and its overseas interests," says Joaquim Caeiro, an
analyst in Portugal's now very active real estate market.
"Mozambique was rich, Angola was rich." Even though Portugal was a
founding member of the European Free Trade Association, "the
colonies and the kind of protected internal economy they allowed
retained people's focus," Mr. Caeiro says.

The colonies were lost in the early 1970s, however. After an
economically disastrous decade, Portugal entered the EC in 1986.
And from that point, when Portugal redirected its gaze to Europe,
the country's economy has seen strong, steady growth - recently the
highest annual rates in the Community.

"The single greatest factor in Portugal's economic evolution has
been EC membership and an opening to Europe in general," says Rui
Madaleno, economic director of the Association of Portuguese
Industries. To make his point, Mr. Madaleno cites striking
statistics on Portuguese foreign trade: In 1970, the EC accounted
for 44 percent of Portugal's exports, while the country's colonies
received 25 percent. In 1989 the EC's share of Portuguese exports
had jumped to 72 percent, while the former colonies had dropped to
barely 3 percent.

Another important result of EC membership, says Madaleno, is
that Portugal is developing "a very natural economic partnership"
with Spain. …

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